J.C. Penney: 'American comeback story?'

Investors love the back-to-basics approach from J.C. Penney. Can the rebound last?

Don't look now, but J.C. Penney shares are on fire lately.

The stock has nearly doubled since hitting a multi-decade low below $5 in early February. And it was up nearly 9% Tuesday to its highest levels since the end of last year.

Why the optimism? Citigroup analyst Oliver Chen upgraded J.C. Penney (JCP) on Tuesday to a "buy" and called the retailer an "American comeback story." Chen said he's a believer in the company's turnaround plan, a back to basics approach focusing on private-branded merchandise that J.C. Penney is best known for.

The brighter outlook comes after a rough few years. Sales went into a tailspin under former CEO Ron Johnson, who was brought in from Apple (AAPL) in 2011. Johnson started the company on a radical new path that eliminated the discounts that core J.C. Penney customers had come to rely on.

But his strategy failed. Johnson was fired last year and the company brought back former CEO Myron "Mike" Ullman to lead J.C. Penney.

Ullman's restructuring plan seems to have stopped the bleeding for now. The company's recent stock surge began after J.C. Penney announced late last month that same-store sales rose 2% during the fourth quarter. Online sales were up 26% from a year ago. Those are both very promising signs.

But investors may still have good reason to be cautious. Chen points out that fears remain about the company's liquidity.

Still, Chen feels that these worries are "overdone" and that the company's new strategy should lead to improved sales and profit margins and a bigger cash position for the company. In fact, Chen now has a price target of $11.00 on the stock, up another 20% from current levels.

J.C. Penney introduced a new slogan during the Olympics: "When it fits, you feel it." And while that has drawn some guffaws from the peanut gallery on Twitter, investors clearly feel that Ullman is the right fit for the company.